Office rental market expected to pick up: JLW predicts resurgence in property development
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Your support makes all the difference.JONES LANG WOOTTON, the surveyor and property consultant, yesterday forecast a resurgence of the property development cycle in 1994 following a bumper year for the investment market.
Kevin Clarke, investment sales and purchases partner, said the firm expected up to 1.5 million sq ft of new offices to be started this year, evenly split between the City and the West End in London. Last year only 300,000 sq ft were begun, all in the West End and all in the final quarter.
A survey of business confidence by JLW confirmed that last year's surge in investor confidence in property was likely to be followed by greater demand for space by occupiers.
Almost two thirds of office occupiers said they expected their firm's business to be in better shape in six months than it was currently. Last July the same poll revealed only half of all businesses were as confident.
Historically, rises in business confidence have preceded increases in office take-up, suggesting that demand is likely to rise this year, in turn reducing vacancies and pushing up rents.
Office vacancies, which peaked at about 19 per cent of total City stock at the beginning of 1993, have fallen to 15 per cent over the past 12 months.
Rents, which peaked at well over pounds 60 per sq ft in the both the City and West End in 1989 continued to fall during the first half of 1993 but have plateaued at about pounds 40 in the West End and pounds 32.50 in the City.
JLW thinks a rise in rents is likely because, while vacancy rates are still nominally high, shortages of good quality space are appearing, especially for large lettings. Although more than 13 million sq ft of space is available in the City of London, little more than a third of that represents units of more than 50,000 sq ft.
According to Jones Lang, a side effect of the slump in rental values in central London has been a sharp slowdown in the rate at which companies are leaving. During 1993, only eight large organisations moved out of London, compared with 23 departures in 1992 - the smallest exodus since 1964.
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